Uranium prices rise with demand for nuclear power

February 26, 2024

Workers at a uranium mine in Kazakhstan, which produces 43 percent of the world's total — Workers at a uranium mine in Kazakhstan. The central Asian country produces 43 percent of the world's total

Uranium prices doubled in past year
Plans to treble global nuclear power
Sulphuric acid shortage hits production

Barakah in the UAE, Dabaa in Egypt, Bushehr in Iran and Akkuyu in Turkey. Nuclear energy is now seen by many countries as central to emissions reduction. It is little surprise then that demand for feedstock – mainly uranium – has been spiking.

Prices for the mineral, which is critical to the production of nuclear power – and weapons – have doubled over the past year supported by years of underinvestment, along with global conflict, which have combined to curtail supply.

One consequence of these high prices is likely to be a surge in exploration and new mining development worldwide, including in the Gulf and Mena regions, according to analysts.

“At this price, a lot of new projects around the world now become profitable,” Radoslaw Beker, director of natural resources and commodities at Fitch, tells AGBI.

Digging uranium out of the ground is only the first step in nuclear power production.

The raw material then has to be processed into “yellowcake”, then enriched, then fabricated into nuclear fuel for use in nuclear power stations.

Looking at the first stage, 85 percent of the world’s raw uranium is produced by six countries: Kazakhstan, Canada, Namibia, Australia, Niger and Russia.

Kazakhstan and Canada are currently the biggest uranium miners, respectively responsible in 2022 for 43 percent and 15 percent of total world supply, according to the World Nuclear Association.

The next stage – uranium enrichment – has historically been dominated by countries with nuclear weapons programmes, such as the US, Russia, China, the UK and France.

Other countries such as Iran, Israel, Japan and North and South Korea have enrichment industries however.

The enriched uranium they produce is then fabricated into pellets and then rods – the fuel used in nuclear reactors.

Around 50,000 of these rods are required per year for a 1 gigawatt (GW) plant.

Prices were low for an extended period following the 2011 Fukushima nuclear accident in Japan
William Freebairn, S&P

At Cop28 last year, a group of 22 countries called for a trebling of global nuclear power capacity by 2050, as part of greenhouse gas reduction plans.

If countries around the world are to meet such ambitious expansion targets, each of the above production stages needs to ramp up.

“A significant increase in uranium supply will be required from the late 2020s to meet the demand created by the expected increase in global nuclear capacity,” says Henry Preston, a spokesperson for the World Nuclear Association.

Yet this comes after a period of underinvestment in uranium production, largely as a result of a singular industry – and human – disaster.

“Prices were low for an extended period following the 2011 Fukushima nuclear accident in Japan,” says William Freebairn, director of nuclear power and uranium at S&P.

Following the disaster, many countries closed or mothballed uranium mines, refineries and fabrication facilities, creating a major oversupply of the mineral and its derivatives.

Now though, “this inventory has all unwound,” says Fitch’s Beker, leaving nuclear expansion countries with no option but to re-open facilities and increase old production.

Shortages and supply problems

This has caused difficulties. In Kazakhstan, for example, the leeching method used for mining involves injecting a solution containing sulphuric acid into the ground to melt the uranium, before pumping out the results.

A recent shortage of sulphuric acid has therefore hit uranium production, contributing to global undersupply.

Maintenance and supply chain challenges have also hit Cameco, Canada’s leading miner, stemming from post-Fukushima underinvestment.

In addition, Western sanctions following the invasion of Ukraine have affected Russia’s Rosatom, which accounts for around half of the world’s enriched uranium supply.

The US – which still imports around 12 percent of its low-enriched uranium from Russia – is also currently moving to ban that supply too, with a resolution currently proceeding through Congress.

The GCC region has not been unaffected by these global trends, even if currently it has only one nuclear player – the UAE. This has the 4-reactor, 5.6GW Barakah Nuclear Power Plant. The fourth unit of this is currently gearing up.

The UAE has also announced tendering for a fuel fabrication plant, along with a deal for further nuclear cooperation with South Korea.

Next door, Saudi Arabia has plans to add around 17GW of nuclear power to its energy mix by 2040. As a first step, the kingdom’s February 2023 budget provided funds for two 1.4GW reactors.

The country also wants to use domestic resources for the whole nuclear fuel cycle – from mining to yellowcake, enrichment to fabrication.

“Saudi Arabia ideally wants to keep things in-house, rather than relying on importing refined uranium, as the UAE does,” says Justin Alexander, chief economist at Mena Advisors.

The extent of Saudi Arabia’s domestic resources are unknown. In January 2023, Abdulaziz bin Salman Al Saud, the Saudi energy minister, said that significant deposits of uranium existed in Jebel Said and Medina, as well as in the north of the kingdom.

He also said that the uranium was associated with rare mineral deposits, suggesting that companies which have invested in mining the first could also mine the second.

Uranium is trading at around $100 a pound – roughly double its February 2023 level – so that Saudi proposition may now look more attractive than ever to international miners.

“This high price is more structural than temporary, too,” says Beker.